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Sino-Forest Releases Independent 2009 Forest Asset Valuation Report

April 30, 2010

TORONTO, April 30 /PRNewswire-FirstCall/ – Sino-Forest Corporation (“Sino-Forest”) (TSX:TRE), a leading, commercial forest plantation operator in China, released today its yearly forest valuation report conducted by Poyry (Beijing) Consulting Company Limited (“Poyry”), an international forestry consulting firm. Poyry has estimated the value of Sino-Forest’s forest assets on 491,000 hectares (“ha”) of area, based on a single rotation(1) using a pre-tax discount rate of 11.5%, to be approximately US$2.3 billion as at December 31, 2009.

Sino-Forest had approximately 512,700 ha of trees under management at year end 2009. However, Poyry excluded 21,000 ha from its valuation as they were recently harvested or allocated for bio-fuel, carbon credit development and other purposes. The report also excluded the approximately 155,600 ha of fibre which Sino-Forest acquired from Mandra Forestry Holdings Ltd. in February 2010.

The 40% increase in appraisal value from US$1.64 billion in 2008 to US$2.3 billion in 2009 was largely attributable to the growth and value increment associated with the existing owned forests, and the increase in the area of owned forest through net acquisition. The average age (maturity) of the trees within the forest owned as at December 31, 2009 increased by about four years. While there have been increases in log prices, these have been countered by increases in harvest related costs, so the net impact of stumpage on value was negligible.

Assuming perpetual(2) management of the existing areas of forest with continuous replanting of plantation trees after harvesting, Poyry’s estimate of the prospective valuation of Sino-Forest’s forest assets (also based on year end hectares under management, using the pre-tax discount rate of 11.5%) was estimated to be US$2.13 billion. This valuation takes into account revenues and costs of re-establishing and maintaining the forest plantations for a 60-year period.

The following table presents Poyry’s estimated values based on forecast cash flows arising from the management and harvest of the forest estate and the application of an 11.5% discount rate to the pre-tax cash flows.

    -------------------------------------------------------------------------
                                              2009         2008    Change (%)
    -------------------------------------------------------------------------
    Trees under management at year
     end (hectare)                         512,700      347,000         47.8
    -------------------------------------------------------------------------
    Tree area valued by Poyry*
     (hectare)                             491,000      335,000         46.6
    -------------------------------------------------------------------------
    Value of existing forest assets(1)
     (US$' millions)                     $ 2,297.5    $ 1,644.6         39.7
    -------------------------------------------------------------------------
    Value with perpetual rotation(2)
     (US$' millions)                     $ 2,128.8    $ 1,693.2         25.7
    -------------------------------------------------------------------------
    Average yield (m(3) per hectare)           126          112         12.5
    -------------------------------------------------------------------------
    * Certain hectares were excluded because they were recently harvested
        or allocated for bio-fuel, carbon credit development and other non-
        harvestable purposes.

Poyry’s report provides the following valuation and methodology:

    1.  Single rotation, also called "current rotation analysis", assumes
        approximately 85% of forest assets harvested over the next 10 years,
        and includes only the revenue and costs associated with the existing
        tree inventory.

    2.  Perpetual rotation refers to perpetual re-establishment, maintenance
        and harvesting through several rotations over a 60-year period. This
        valuation excludes forest assets yet to be acquired under Sino-
        Forest's long-term fibre purchase agreements, but includes all
        revenue and costs associated with sustainable forestry modelled in
        perpetuity.

    3.  Both the single rotation and the perpetual rotation valuations assume
        an average log price increase totalling 6.5% (or an average 1.3% per
        annum) over the next five years, then zero price movement thereafter.

Poyry estimated that Sino-Forest’s total merchantable standing timber volume as at year end 2009 was 62.0 million m(3), compared to 37.5 million m(3) in 2008, representing a 65% increase in wood fibre. The volume increase was attributable primarily to the acquisition of more mature forest carrying higher volumes and the recognition of higher volumes in one of the owned major forest types. Overall, the average yield of Sino-Forest trees increased 13% from 112 m(3) per ha in 2008 to 126 m(3) per ha in 2009.

Sino-Forest Chairman & CEO Allen Chan said, “In the 2009 valuation report, we are very pleased to see that Poyry recognised during its 2009/10 field assessments that in certain areas, eucalypt plantations established by Sino-Forest are able to achieve yields of more than 200 m(3)/ha for trees at age six. These yields are significantly higher than those of 12-year-old pine trees currently grown by Chinese farmer-collectives that achieve a typical yield of 120 m(3)/ha. We will continue to apply our scientifically advanced biotechnology and silviculture techniques to improve the yields of plantation forests at designated plantation areas. Our objective is to shorten tree growth cycles and substantially increase plantation fibre output to help reduce China’s chronic fibre deficit.”

An extract of valuation report is available on Sino-Forest’s website under “Investor Relations”, “Filings” http://www.sinoforest.com/filings.asp, and will also be filed on SEDAR at www.sedar.com.

Notice of Conference Call

Sino-Forest will host a conference call with consultants from Poyry Forest Industry on Wednesday May 5, 2010 at 8:00 am EST / 8:00 pm HKT to discuss modelling and valuation in its forest asset valuation report. Sino-Forest stakeholders are invited to dial in, however, we will take questions only from investment research analysts.

To participate, please dial +(1) 647-427-7450 for local and international callers or 888-231-8191 for North America toll-free access. Alternatively, you may connect to the following link for the webcast (listen only mode) and replay http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3061080. A replay will be available for 15 days. No transcript of the call will be provided.

About Poyry (Beijing) Consulting Company Limited

Poyry (Beijing) Consulting Company Limited is an independent management consulting entity within the Poyry Group and is recognised as one of the world’s leading advisors to the global forestry industry cluster. The cornerstones of its operations are its strong business understanding and industry expertise. The Forest Industry business group’s global network of around 2,100 employees covers 17 countries in all major forest products regions in the world.

About Sino-Forest Corporation

Sino-Forest Corporation is a leading, commercial forest plantation operator in China. Its principal businesses include the ownership and management of forest plantation trees, the sale of standing timber and wood logs, and the complementary manufacturing of downstream engineered-wood products. Sino-Forest’s common shares have traded on the Toronto Stock Exchange under the symbol TRE since 1995.

Please note: This press release contains projections and forward-looking statements regarding future events. Such forward-looking statements are not guarantees of future performance of the Company and are subject to risks and uncertainties that could cause actual results and company plans and objectives to differ materially from those expressed in the forward-looking statements. Such risks and uncertainties include, but not limited to, changes in China and international economies; changes in currency exchange rates; changes in worldwide demand for the Company’s products; changes in worldwide production and production capacity in the forest products industry; competitive pricing pressures for the Company’s products and changes in wood and timber costs.

The Sino-Forest Corporation – Valuation of China Forest Crop Assets 2009 report has been prepared by Poyry (Beijing) Consulting Company Limited (“Poyry”) solely for use by Sino-Forest Corporation. All other use is strictly prohibited and no other person or entity is permitted to use this report, unless otherwise agreed in writing by Poyry.

NOTHING IN THIS REPORT IS OR SHALL BE RELIED UPON AS A PROMISE OR REPRESENTATION OF FUTURE EVENTS OR RESULTS. POYRY HAS PREPARED THIS REPORT BASED ON INFORMATION AVAILABLE TO IT AT THE TIME OF ITS PREPARATION. NEITHER SINO-FOREST NOR POYRY HAVE THE DUTY TO UPDATE THIS REPORT.

SOURCE Sino-Forest Corporation


Source: newswire



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